The federal budget for 2023-24 proposes measures for personal tax relief, support for small and medium-sized businesses, and improvements to superannuation and social security entitlements. Also included are measures to support the cost of living, such as a lump sum payment for eligible beneficiaries and initiatives to reduce childcare costs and improve access to affordable housing. Let’s explore some recommended criteria for this budget with a blog post.
Business
The 2023–24 Federal Budget introduced significant changes to business taxation, including ending the temporary full-expenses regime and replacing it with an immediate $20,000 asset write-off for small businesses. Larger businesses will have a write-off limit of $1,000. In addition, small businesses with annual sales of less than $50 million receive an extra 20% rebate on expenses that promote energy efficiency.
The budget also introduces an amnesty program with fines for small businesses with a total turnover of less than $10 million. This program will waive penalties for non-payment of tax returns filed between 1 June 2023 and 31 December 2023. It will also provide ATO funding to address unpaid tax and superannuation debts for businesses with high-value debts over $100,000 and old debts older than two years.
These changes may affect the cash flow of businesses when acquiring assets above the relevant thresholds, as depreciation will not be claimed upfront. On the other hand, the bonus deduction and penalty amnesty program provides tangible benefits to businesses, reducing their taxable income by a further 20% and allowing them to re-engage with the ATO by catching up with overdue payments, without late filing penalties. Businesses in the target categories for compliance measures should strongly consider resolving their debts and entering into payment arrangements where eligible.
Discarding the proposed changes to the patent box
The government has announced that the proposed changes to the patent field will not be implemented.
The aim of the changes was to introduce preferential tax treatment for eligible corporate income associated with new patents in the medical, biotechnological, agricultural, and veterinary chemical sectors, as well as for patented technologies that have the potential to reduce emissions.
These changes were announced in two previous budgets but never made it into law.
Since the proposed changes were never implemented, their repeal will have no tangible impact compared to current patent taxation.
Individuals
The Australian Government has announced its 2022-23 Budget, outlining various proposals and changes for individuals. Here’s a closer look at what this means for tax cuts and compensation:
No changes to phase 3 tax cuts
- The government has not proposed any changes to the enacted 3rd level of tax reduction.
- From 1 July 2024, the marginal tax rate of 32.5% will be reduced to 30% for one large tax bracket between $45,000 and $200,000.
- The 37% tax bracket will be completely abolished at this time.
- While this may seem like a win for middle and upper-middle-income earners, higher-income earners will benefit more in dollar terms.
- Individuals earning $75,000 will be better off by $750 per year, those earning $125,000 will be better off by $2,225, and those earning $200,000 will be better off by $9,075.
Low and Medium Income Tax Compensation (LMITO) is not extended
- LMITO was introduced in 2018 and was supposed to be paid out only once, but was extended twice due to the pandemic.
- This tax offset ended on 1 July 2022 and was not extended on budget night.
- No replacement tax breaks were offered for low- and middle-income earners.
- Low-income earners may face an increased tax liability of up to $1,500 when they file their 2022/23 tax returns.
The 2022–23 Budget, therefore, proposed no changes to the 3rd stage of tax cuts, but the LMITO was not extended, which may lead to an increase in tax liability for low-income earners. It is important to be aware of these changes and consult a tax professional to ensure you maximize your tax benefits
Superannuation
Additional tax approved for account balances on income above $ 3 million: What you need to know
The 2022-23 Federal Budget approves the previously announced additional tax on superannuation “income” for individuals with account balances above $3 million from 1 July 2025. This is in addition to the current income tax rate of 15%. all fund income. Although additional information is not provided in the budget document, this means you:
- The 15% surcharge is an additional tax charge for individuals, however, it is estimated to be less than 0.5% for individuals with checking accounts. The tax can be paid by the superannuation fund or by the individual.
Super payday guarantee from 1 July 2026: What you need to know
The budget also proposes that all employers pay their employees’ pensions from July 1, 2026, together with wages and salaries. , instead of every three months. Here’s what you need to know:
- Employers may need to manage their cash flow more carefully, but SG will improve payment transparency and increase retirement savings for employees.
- For example, the Treasury says the average 25-year-old earning a quarter of his bimonthly super income could be around $6,000 or 1.5% better off in retirement.
No minimum superannuation reduction for 2023/24: What you need to know
The temporary 50% reduction in the minimum annual payment amount for superannuation and annuities will not be extended until 2023/24. Here’s what you need to know:
- Pensioners must withdraw at least 50% more than this financial year. The minimum payment is determined by the age of the borrower and the value of the account balance on July 1 of each year.
- Failure to meet the minimum spending amount may result in the pension being considered as stopped at the beginning of the income year for tax purposes.
NALI changes – proposed several cuts: what you need to know
The government is proposing to amend the Long Term Income (NALI) rules to remove the costs associated with the contingency fund. In particular, for SMSF trustees, the government proposes to limit the level of income of the fund that is taxed as NALI to twice the “total” cost affected. Here’s what you need to know:
- Reduction to the majority of two (instead of one) is good news for SMSF trustees.
- Previously, the government claimed that the maximum amount of income at the maximum marginal level would be five times the level of total expenditure.
Hence, the Budget has proposed a number of changes that will affect pensioners in the coming years. While some changes can have a positive impact on individuals, others require careful planning and management.
Social Security and Cost of Living
The 2022-23 Federal Budget brought significant increases in support payments and other benefits to Australians. Here’s what you need to know.
Increase in the base rate for support payments
- Around 1.1 million Australians receiving support payments such as JobSeeker, Austudy, and Youth Allowance will receive a basic rate increase of $40 a fortnight.
Increase in the number of job seekers
- People over 55 who have been on JobSeeker for nine or more consecutive months will receive an increase of $92.10 per fortnight. This is an extension of existing policies that only apply to people over 60 years of age.
Discounts on energy bills
- 5.5 million households and 1 million businesses will receive $500 in energy rebates, aimed at pensioners, Commonwealth Seniors Health Card holders and households receiving income support such as Family Tax Benefits A and B. Income limits apply.
Increase in lump sum parental allowance
- Single parents will be able to receive a lone parenting allowance until their youngest child turns 14, up from eight at present.
Rent increase
- The Commonwealth Rent Assistance rate will increase by 15%, providing an extra $31 a fortnight to about 1.1 million eligible households.
These measures are expected to bring significant relief to Australians who are struggling financially. If you have any questions or concerns about how these changes may affect you, please don’t hesitate to contact us. Our team of accounting professionals is here to help you navigate the changes and ensure you get all the benefits you’re entitled to.
In conclusion, the 2023-24 Federal Budget aims to provide tax relief to individuals, support small and medium-sized businesses, improve superannuation and social security entitlements, and support the cost of living
